Atari 2011 Annual Report Download - page 90

ANNUAL FINANCIAL REPORT – REGISTRATION DOCUMENT
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25.2 DISPUTES TO WHICH ATARI IS PARTY
25.2.1. BVT production fund v. Atari Europe SAS
This dispute concerns two German entities, the BVT production funds, which financed the production of certain
interactive games, under a series of agreements entered into with various Group companies.
Following exchanges of letters and an audit in December 2008, the BVT funds instituted proceedings in February and
March 2009 in Germany, claiming that Atari Europe had failed to perform several contractual obligations arising from its
publishing agreements with the funds. The funds are suing Atari Europe in the German courts for 2 million euros in
damages.
Atari Europe contested all of the plaintiffs’ allegations. A full complaint was filed with the courts of competent jurisdiction
in early November 2009 and a hearing took place in November 2009. The Munich Court issued an opinion in February of
2010 where most of BVT’s claims were dismissed. The Munich Court ordered Atari to provide data related to the MAC
sales to BVT. Atari complied but appealed the Munich Court’s ruling. BVT has also appealed the court’s decision. Oral
argument on these appeals took place in December 2010. Subsequently, the parties successfully settled the suit. In
exchange for a full release, Atari agreed to pay 400K Euros for each suit for a total of 800K Euros. These payments
have been made in full and the settlement was filed with the court.
25.2.2. Hasbro, Inc. v. ATARI SA
Hasbro, Atari’s licensor for exclusive, world-wide rights to create, design, develop, manufacture, have manufactured,
market and sell digital games based upon the Dungeons & Dragons worlds, sued Atari in federal District Court in Rhodes
Island on December 16, 2009. Hasbro’s Complaint alleged breach of contract, asserting that Atari had entered into
unapproved sublicenses, allowed access by an un-authorized sublicensee to confidential information as well as other
claims such as intentional misrepresentation and an accounting of monies paid for certain activities. Hasbro is requesting
that the court determine that contract can be terminated. Atari countersued Hasbro on December 22, 2009 for over $100
million in damages, alleging, among other things, breaches of contract including unapproved removal of certain
Dungeons and Dragons realms, and a claim of tortious interference with Atari’s relationship with its potential
sublicensees. In 2010, Atari and Hasbro engaged in mediation. Upon the conclusion of the mediation, the case had not
settled. Subsequently, discovery commenced and will be ongoing through early to mid-2011. The partied have engaged
in motion practice on various issues. There has been discussion between the parties, but it has not been finalized.
There is no scheduled trial date.
25.2.3. Atari, Inc. v. Zoo Publishing, Inc.
On March 2, 2011, Atari, Inc. filed suit against Zoo Publishing, Inc. in the federal court of the Southern District of New
York. Atari alleged that Zoo breached its contracts with Atari by failing to deliver games and make payments to Atari as
were appropriate under those agreements. Atari has alleged damages of $1.5 million. The parties commenced
settlement discussions and a settlement agreement and release was executed. Zoo agreed to provide Atari with
approximately $1.5 million in product that Atari expects to sell over the next 12 months.
25.2.4. Walker Digital v. Atari, Inc., Cryptic Studios, Inc. and others.
Atari, Inc. and Cryptic Studios, Inc. have been sued, along with 20 other video-game-industry entities by a company
known as Walker Digital LLC for patent infringement. The suit resides in federal court in the District of Delaware and was
filed on April 11, 2011. Atari has not yet been served. The patent at issue is numbered 5,970,143 and is titled “Remote
Auditing of Computer Generated Outcomes, Authenticated Billing and Access Control and Software Metering Systems
Using Cryptographic and other Protocols”. Walker Digital is operated out of Stamford, CT. Cryptic is being sued for
technology associated with the game known as Star Trek Online. The technology allegedly infringed is associated with
making and using systems for remote auditing of computer generated outcomes, allowing saving of game outcomes for
further use as well as monitoring the amount of time a player spends playing a game. Atari is being sued for technology
that is claimed to be utilized by Faries vs. Darklings in that the Atari system allows the saving of game outcomes for
further use, as well as monitoring the amount of time a player spends playing a game. The Company has entered into a
joint defense.
25.2.5. Walker Digital v. Cryptic Studios, Inc. and others.
Cryptic Studios, Inc. has been sued, along with 8 other video-game-industry entities in a second suit patent infringement
initiated by Walker Digital LLC. In the second suit, also filed in federal court in the District of Delaware, the patent
involved is 6,527,638 and is titled “Secure Improved Remote Gaming System” and the technology is associated with pre-
paid cards for gaming credits associated with Champions Online and Star Trek Online. The suit was filed on April 11,
2011 and the company has entered into a joint defense.